Oklahoma Homeowners Insurance

Oklahoma presents unique challenges for homeowners insurance due to its location in Tornado Alley and frequent severe weather events including tornadoes, hailstorms, and high winds.

Oklahoma Weather Risks

Severe Weather Patterns

Oklahoma ranks among the highest states for weather-related insurance claims:

Impact on Insurance

These weather patterns create specific insurance considerations:

• Higher Premiums: Oklahoma homeowners pay above-national-average premiums
• Wind/Hail Deductibles: Separate percentage deductibles (1%-5% of dwelling coverage)
• Coverage Limitations: Some insurers limit wind/hail coverage or require inspections
• Underwriting Scrutiny: Roof age, construction type, and claims history heavily impact eligibility

Exam Tip: Oklahoma's severe weather creates a challenging insurance environment. Know that wind/hail deductibles are often separate percentage deductibles, not flat dollar amounts.

Standard Homeowners Forms in Oklahoma

Oklahoma uses standard ISO (Insurance Services Office) homeowners forms:

HO-3 Special Form (Most Common)

Coverage Structure:

• Dwelling (Coverage A): Open perils (all risks except excluded)
• Other Structures (Coverage B): 10% of Coverage A
• Personal Property (Coverage C): 50-70% of Coverage A (named perils)
• Loss of Use (Coverage D): 20% of Coverage A
• Personal Liability (Coverage E): $100,000 minimum (higher limits available)
• Medical Payments (Coverage F): $1,000-$5,000 per person

HO-2 Broad Form

Coverage:

• Named perils coverage for dwelling AND personal property
• Less expensive than HO-3
• Common in higher-risk areas or older homes

Named Perils Covered:

1. Fire or lightning
2. Windstorm or hail
3. Explosion
4. Riot or civil commotion
5. Aircraft
6. Vehicles
7. Smoke
8. Vandalism or malicious mischief
9. Theft
10. Volcanic eruption
11. Falling objects
12. Weight of ice, snow, or sleet
13. Accidental discharge of water or steam
14. Sudden tearing apart of heating/cooling systems
15. Freezing of plumbing, heating, or AC systems
16. Sudden damage from artificially generated electrical current

HO-4 Renters Policy

For tenants renting apartments, houses, or condos:

Coverage Provided:

• Personal Property: Named perils coverage
• Loss of Use: Additional living expenses if unit uninhabitable
• Personal Liability: Protection against lawsuits
• Medical Payments: Covers guest injuries

Not Covered:

• Building structure (landlord's responsibility)
• Landlord's personal property

HO-6 Condominium Policy

For condominium unit owners:

Coverage:

• Personal Property: Named perils
• Unit Improvements: Covers upgrades beyond standard construction
• Loss Assessment: Covers special assessments from HOA
• Personal Liability: Protects against lawsuits

Master Policy Coordination:

• Condo association maintains master policy on building
• HO-6 fills gaps in master policy coverage
• "Walls-in" vs. "All-in" master policies affect HO-6 needs

Oklahoma-Specific Homeowners Requirements

Cancellation and Non-Renewal Rules

Oklahoma law provides consumer protections for policy cancellations:

Permitted Reasons for Cancellation After 60 Days:

• Nonpayment of premium
• Fraud or material misrepresentation
• Substantial increase in hazard
• Insured violated policy terms

Exam Tip: Oklahoma requires 14 days' notice for cancellation after 60 days and 30 days' notice for non-renewal. These notice periods are strictly enforced.

Credit Score Protections

Oklahoma law limits use of credit information:

• Prohibition: Cannot cancel or refuse to renew based solely on credit score
• Permitted Use: Can use credit-based insurance scores for initial underwriting and rating
• Transparency: Must explain if adverse action taken based on credit
• Consumer Rights: Policyholders can request explanation of credit impact

Roof Age and Condition

Many Oklahoma insurers impose requirements due to hail damage frequency:

Common Requirements:

• Roof inspections for homes with roofs 10+ years old
• Actual Cash Value (ACV) coverage for older roofs
• Higher deductibles for older roofs
• Some insurers won't write policies on roofs 15+ years old

Oklahoma FAIR Plan

Purpose

The Oklahoma FAIR Plan (Fair Access to Insurance Requirements) provides basic property insurance when coverage is unavailable in the voluntary market.

Eligibility

Who Qualifies:

• Property owners unable to obtain coverage in voluntary market
• Must have been declined by at least one insurer
• Property must meet minimum standards
• Available for residential and commercial properties

Coverage

What FAIR Plan Provides:

• Fire and Extended Coverage: Basic perils
• Vandalism and Malicious Mischief: Optional
• Limited Coverage: Not as comprehensive as standard policies
• Higher Premiums: Rates typically 25-50% higher than voluntary market

What FAIR Plan Excludes:

• Theft coverage
• Personal liability
• Medical payments
• Personal property (in some cases)

Application Process

1. Attempt Voluntary Market: Try to obtain coverage from standard insurers
2. Obtain Declination: Get written proof of declination
3. Apply to FAIR Plan: Submit application with declination notice
4. Property Inspection: FAIR Plan may inspect property
5. Approval/Denial: Decision within 30 days

Exam Tip: The Oklahoma FAIR Plan is a residual market mechanism for property owners who cannot get coverage in the voluntary market. It provides basic fire coverage at higher rates.

Wind and Hail Coverage in Oklahoma

Separate Wind/Hail Deductibles

Due to severe weather frequency, most Oklahoma policies include:

Percentage Deductibles:

• Applied as percentage of Coverage A (dwelling coverage)
• Typical ranges: 1%, 2%, or 5%
• Applies only to wind/hail losses

Example Calculation:

Home insured for $200,000 with 2% wind/hail deductible

• Hail damages roof: $10,000 in damages
• Deductible: $200,000 × 0.02 = $4,000
• Insurance pays: $10,000 - $4,000 = $6,000

Wind/Hail Exclusions

Some insurers in high-risk areas:

• Exclude wind/hail coverage entirely
• Offer coverage through separate wind pool
• Require higher deductibles in specific zip codes
• Limit roof coverage to Actual Cash Value

Oklahoma Windstorm Underwriting Association

For properties in high-wind areas where coverage is unavailable:

• Provides wind/hail coverage when declined by insurers
• Must have underlying fire insurance policy
• Covers only wind and hail losses
• Higher premiums reflect increased risk

Replacement Cost vs. Actual Cash Value

Replacement Cost Coverage

Most Comprehensive Option:

• Pays to replace/repair with materials of like kind and quality
• No depreciation deducted
• Requires rebuilding or repairing to collect full amount
• Higher premiums than ACV

$\text{Replacement Cost Payment} = \text{Cost to Replace} - \text{Deductible}$

Example:

• 10-year-old roof damaged by hail
• Replacement cost: $15,000
• Deductible: $2,000
• Insurance pays: $13,000

Actual Cash Value Coverage

Less Expensive Option:

• Pays replacement cost minus depreciation
• Reflects current market value of damaged item
• Lower premiums than replacement cost
• Common for older roofs in Oklahoma

$\text{ACV Payment} = \text{Replacement Cost} - \text{Depreciation} - \text{Deductible}$

Example:

• Same 10-year-old roof
• Replacement cost: $15,000
• Depreciation (10 years): $6,000
• Deductible: $2,000
• Insurance pays: $7,000

Depreciation Schedules

Typical depreciation for common items:

Exam Tip: Understanding replacement cost vs. ACV is critical for Oklahoma claims. Many insurers require ACV on older roofs due to frequent hail claims.

Special Oklahoma Endorsements

Earthquake Coverage

Oklahoma experienced increased seismic activity (2010-2016) related to oil/gas operations:

Coverage Availability:

• Available as endorsement to homeowners policy
• Separate earthquake deductible (typically 5-10%)
• May be excluded in certain high-risk areas
• Relatively affordable compared to California

What's Covered:

• Structural damage from earthquake
• Personal property damage
• Additional living expenses

Exclusions:

• Landslide or mudslide (unless directly caused by earthquake)
• Flood damage following earthquake
• Intentional acts

Sewer and Water Backup

Common endorsement in Oklahoma:

• Covers damage from sewer or drain backup
• Typical limit: $5,000-$25,000
• Covers cleanup and restoration
• Important for properties with basement drainage issues

Personal Property Replacement Cost

Endorsement Benefits:

• Upgrades Coverage C to replacement cost
• No depreciation on personal property claims
• Pays actual replacement cost for items
• Modest premium increase

Example Without Endorsement (ACV):

• 5-year-old TV stolen
• Replacement cost: $800
• Depreciation: $400
• Payment: $400

Example With Endorsement (RC):

• Same stolen TV
• Payment: $800

Increased Jewelry/Valuables Coverage

Standard policies limit coverage for:

• Jewelry: $1,500-$2,500
• Firearms: $2,500
• Silverware: $2,500
• Cash: $200-$500

Solution: Schedule valuable items with appraisals for full coverage

Oklahoma Property Valuation

Determining Dwelling Coverage (Coverage A)

Methods for Determining Adequate Coverage:

1. Replacement Cost Estimator: Insurance company tool estimates rebuild cost
2. Square Footage Calculation: Cost per square foot × home size
3. Professional Appraisal: Detailed assessment of rebuild costs

Oklahoma-Specific Considerations:

• Construction costs vary by region
• Severe weather may increase rebuild costs
• Building code upgrades may add expense
• Labor availability affects costs

Underinsurance and Coinsurance

Many policies include 80% coinsurance clause:

$\text{Payment} = \frac{\text{Insurance Carried}}{\text{80\% of Replacement Cost}} \times \text{Loss} - \text{Deductible}$

Example of Underinsurance Penalty:

• Home replacement cost: $300,000
• Required coverage (80%): $240,000
• Actual Coverage A: $180,000 (underinsured!)
• Loss amount: $60,000
• Deductible: $2,000

Calculation:

• $180,000 ÷ $240,000 = 0.75 (75% insured)
• Payment: $60,000 × 0.75 - $2,000 = $43,000
• Insured bears $17,000 loss due to underinsurance

Exam Tip: The 80% coinsurance rule penalizes underinsurance. Homeowners should insure for at least 80% of replacement cost to avoid coinsurance penalties on partial losses.